Biotech growth stocks are inherently risky due to the plethora of competitive, financial, clinical, and regulatory hurdles unique to the industry. Despite these various risk factors, however, most of the best-performing stocks of the last decade-plus have come from the land of developmental-stage biotechs.
Amylyx Pharmaceuticals (AMLX -1.12%) and Viking Therapeutics (VKTX 7.92%) are perfect examples of this fundamental trade-off between risk and reward in biotech. Both of these small-cap drugmakers have delivered market-crushing returns for shareholders over the past 12 months. Even so, stakeholders had to hold through scores of risk-laden events to realize these eye-popping gains.
Which of these red-hot biotech stocks is the better buy right now? Let's dig deeper to find out.
The case for Amylyx Pharmaceuticals
Amylyx's value proposition centers around the Food and Drug Administration (FDA)-approved amyotrophic lateral sclerosis (ALS) drug, Relyvrio (AMX0035). Since being approved in the U.S. late last year, the novel ALS medication has seen a surge in prescriptions. As a result of this strong demand, Relyvrio's 2022 fourth-quarter and 2023 first-quarter sales trounced analysts' expectations.
More impressively, Relyvrio stands to eclipse $1 billion in annual sales with a mere 21% market share in the United States. The drug could also surpass $3 billion in sales at its peak, if it can win additional approvals in key commercial territories like the European Union. To put these sales forecasts into context, Amylyx presently sports a market cap of $1.7 billion.
What's the risk? AMX0035's phase 3 trial results are due out in mid-2024. These pivotal data could determine the drug's commercial availability and reimbursement status globally. In turn, a negative readout would almost certainly spark a sell-off. A positive readout, on the other hand, ought to unlock the stock's latent growth potential.
The case for Viking Therapeutics
Viking Therapeutics sports two near-term value drivers. In non-alcoholic steatohepatitis (NASH), the biotech is developing the orally administered selective thyroid hormone beta agonist VK2809. The drug has so far shown an impressive ability to reduce liver fat and improve a patient's lipid profile in mid-stage testing. VK2809 has also exhibited an encouraging safety profile throughout its early- and mid-stage clinical program.
Next year, Viking expects to announce biopsy results from the drug's phase 2b Voyager study, which may determine its suitability for late-stage testing. If approved in this setting, VK2809 could haul in more than $3 billion in peak sales by the middle of the next decade, according to Roth Capital.
On the weight loss front, Viking is developing both a subcutaneous and an oral formulation for the novel dual agonist of the glucagon-like peptide 1 and glucose-dependent insulinotropic polypeptide, VK2735. Viking plans on trialing the injected version of the drug in a phase 2 weight loss study later this year.
Top-line results ought to be available in the back half of 2024. In addition, the biotech is currently assessing the oral formulation in phase 1 testing, with results slated for either late this year or early next year.
Despite being a latecomer to the weight loss market, VK2735 has the potential to top $6 billion in annual sales by 2035, per Roth's latest estimate. For context, Viking's market cap stands at $2.37 billion.
Verdict
Amylyx and Viking both have the potential to double (or more) in value over the next 12 to 18 months. To do so, each company will have to land a major win in the clinic -- an inherently risky proposition.
Viewed this way, Viking is arguably the more compelling buy. The fact of the matter is that Viking offers investors two shots on goal via VK2735 and VK2809. Either of these experimental metabolic disorder drugs could lift the biotech's stock higher.
